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MAT growth and the benefits of having a centralised finance function

By Robert Hill

Thursday, 24 May 2018

The rise of academies

Brexit is dominating the domestic news headlines. If education gets a look-in the stories are, for the most part, about school funding and staff shortages. Even Damien Hinds’ announcements to the NAHT conference at the beginning of May about a simplified school accountability regime barely made it to the news pages – though they have caused more of a stir among school leaders.

Behind the headlines the academy story is still unfolding. As the Secretary of State highlighted in his speech, hundreds of schools are still choosing to become academies every year. At the end of 2017 there were 6,899 academies. By May 1st the number had risen to 7,317, an average rise of around 80 to 90 a month. Judging by the volume of schools applying for academy status and the 1,100 waiting for their application to be approved, we are likely to see that average maintained. That is without any great campaign to pressure schools into becoming academies and despite the more limited circumstances in which schools will be forced to become academies. Indeed it’s reasonable to assume that if this Parliament runs its course around half of all schools will be academies by the time of the next election – currently just over a third are in the academy sector.

Growth and critical mass for MATs

As significant as the growing number of academies is the reduction in the number of academy trusts. The number of stand-alone or single multi academy trusts (MATs) is slowly declining – only just over a fifth of all academies now fall in this category. Conversely the average size of a MAT is growing – 46 per cent of academies are now in MATs that have six or more academies.

Further consolidation of the MAT sector seems inevitable. It makes sense in terms of organisational and financial efficiency. Larger groupings of schools also create the critical mass to provide the scale of expertise and resources necessary to support school improvement.

The argument for consolidation is backed up by some findings from the 2018 academies’ benchmark report from the accountants, James Cowper Kreston. The report, based on a survey of 600 academies, shows that 55 per cent of academies are in deficit – up from 42 per cent the previous year. The size of the deficits is also growing. That may be no great surprise given the well-documented pressure on school budgets.

Link between Financial Management Systems and financial health

The Kreston survey also found that stand-alone academies were more likely to have a deficit than MATs – though the MAT sector as a whole still has a significant deficit. But the most revealing thing about the report is that it suggests that there is a link between the quality and organisation of the financial management systems in a MAT and its financial health.

The survey ranked the MATs from 1 to 4, according to their financial management model:

MAT1 = a fully centralised MAT with financial management and control in one place;

MAT2 = MATs moving towards a centralised or hub model;

MAT3 = MATs with a limited number of centralised functions and no immediate plans to change; and

MAT4 = MATs where each school maintains a significant degree of financial control within the MAT.

The chart below shows that those MATs operating a centralised (MAT1) and partly centralised (MAT2) model appear to be performing significantly better in financial terms than those with little financial centralisation (i.e. MAT3 and MAT4).

Surplus/Deficit (less transfers on conversion and depreciation) for MATs according to degree of centralised financial management control

Note 1: MATs 1 and 2 also appeared to be more effective at negotiating additional funds for taking on weaker schools. This gives a boost to income in the year the grant is given, which will be reflected in these results. Note 2: The MAT 4 numbers are partly distorted by one decentralised MAT that incurred a substantial deficit, however the overall trend is clear. Source: Kreston Academies Benchmark Report 2018.

These findings reinforce other learning from within the sector. If MATs lack the expertise of a director of finance and the accompanying systems and schemes of delegation for overseeing the setting and monitoring of budgets, they are more likely to end up with a financial crisis – either in an individual academy or for the trust as a whole. The centralisation of financial management is bringing with it the disciplines of analysing the cost base of academies, projecting forward income and expenditure and maximising the collective procurement muscle of the academies. If further evidence were needed of the need to move in this direction then the Kreston report also shows that MAT1 and MAT2 trusts were also able to spend more on staff.

Centralising the finance function is, of course, only one of the steps a MAT has to consider as it grows. In a previous blog for Capita SIMS I gave my five ‘top tips’ for building the infrastructure of a MAT to support expansion. A recent report from Ambition School Leadership has developed the thinking and advice for MATs that are navigating their way through the uncertain seas of growth. The report describes how MATs need to address what it calls a series of ‘break points’. A break point is:

“A point of non-incremental change where a MAT has to break with a previous strategic or operational approach and make a shift”.

The full report is well worth a read but Schools Week has very helpfully provided a concise summary of the nine break points.

The evidence base is growing

For too long the growth of academies and MATs has been almost an evidence-free zone. Research and knowledge from a range of sources is at last beginning to point the way to more effective practice and decision-making. MAT trustees and leaders ignore the emerging lessons at their peril.